Microsoft has rejected an option to more than double its existing agreement with UK-based AI infrastructure company Nscale for computing capacity at a data centre in Texas, walking away from a potential deal worth tens of billions of dollars, according to a Financial Times report.
The proposed agreement would have allowed Microsoft to lease additional computing capacity at Nscale’s Ward County data centre in Texas. The option reportedly covered around 500 megawatts of capacity at the site.
Nscale has been developing large-scale data centre infrastructure to support the growing computing requirements of artificial intelligence companies. Its Texas plans include 500 megawatts at its own site and another 700 megawatts at an adjacent facility being developed by cryptocurrency miner Ionic Digital.
Microsoft’s decision leaves Nscale looking for additional customers for the capacity that could have been covered by the expanded agreement. The development comes as the company prepares for a planned initial public offering in the United States, reportedly targeting a valuation of $35 billion.
Nscale has been expanding its AI infrastructure business and has signed agreements with companies including robotics firm Figure. It is also seeking customers for its planned data centre capacity.
The company has faced challenges related to power availability at some of its projects. Its plans for the adjacent Ionic Digital site also remain affected by uncertainty over securing electricity for the remaining capacity. Nscale has faced further delays and local opposition at a site in West Virginia that is linked to a major agreement with Anthropic.
The Financial Times report also highlighted the financial commitments involved in Nscale’s expansion. The company reported a net loss of $1 billion on revenue of $141 million in the first half of 2026.
Nscale has said the Texas decision does not reduce its reported $103 billion backlog and that it is discussing expanded capacity with Anthropic.
Microsoft’s decision follows a separate withdrawal from a planned UK data centre agreement with Nscale after delays in securing a power connection. The latest development adds to the challenges facing AI infrastructure companies as they work to secure customers, financing and electricity for large-scale computing projects.
